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Suppose that Thomas Lee is enrolled in a defined contribution plan in which the employer contributes $8,000 each year. Thomas is earning $80,000 this year and his tax rate is 30 percent (which is not expected to change). Assume that the before- tax rate of return is 8 percent.
(a) What is the additional amount of funds that Thomas will have when he reaches retirement in 10 years as a result of this year's service?
(b) Suppose that Thomas's employer is planning to reduce half of their contribution to the defined contribution plan. Assume that Thomas would like to keep his retirement funds the same as they would have been with the defined contribution plan. If Thomas's only opportunity to save for retirement is in a nonqualified savings plan (no tax benefits), how much would Thomas need to receive in additional salary (which he would then save) to achieve his objective?
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- 4. Suppose that Thomas Lee is enrolled in a defined contribution plan in which the employer contributes $8,000 each year. Thomas is earning $80,000 this year and his tax rate is 30 percent (which is not expected to change). Assume that the before- tax rate of return is 8 percent. (a)What is the additional amount of funds that Thomas will have when he reaches retirement in 10 years as a result of this year's service? (b) Suppose that Thomas's employer is planning to reduce half of their contribution to the defined contribution plan. Assume that Thomas would like to keep his retirement funds the same as they would have been with the defined contribution plan. If Thomas's only opportunity to save for retirement is in a nonqualified savings plan (no tax benefits), how much would Thomas need to receive in additional salary (which he would then save) to achieve his objective?Self-employed persons can make contributions for their retirement into a special tax-deferred account called a Keogh account. Suppose you are able to contribute $10,000 into this account at the end of each year. How much will you have at the end of 30 years if the account pays 3% annual interest? (Round your answer to the nearest cent.)1. If Dave and his employer contribute a total of $10,000 annually, how much will that amount accumulate to over the next 30 years, at which time Dave and Sharon hope to retire? Future Value of Annuity Contribution Years Annual rate of return Future value $10,000 30 7.00% $944,607.86 2. Assuming that Dave's marginal tax bracket is 25 percent, by how much should his federal taxes decline this year if he contributes $7,000 to his retirement account? 3. The Sampsons' tax bracket has not changed. Assuming that Dave contributes $7,000 to his retirement account and that his taxes are lower as a result, by how much are Dave's cash flows reduced over the coming year? (Refer to your answer in question 2 when solving this problem.) 4. If Dave contributes $7,000 to his retirement account, he will have less cash inflows as a result. How can the Sampsons afford to make this contribution? Suggest some ways that they may be able to offset the reduction in cash inflows.
- Suppose that Jerry's 401(k) will have an average APR of 8% for 40 years. Assume both he and his employer each deposit $175.00 each month over that time. How much money will Jerry and his employer deposit into the account over 40 years? How much interest will be earned? (175.00 401(k) contribution )Suppose people can live in two periods. In the first period people are young and they work. Each earns $20,000, and the payroll tax is 10%. In the second period, people are old and they retire. Retirees rely on social security benefits. The social security system is a combination of a funded pension and an unfunded investment, and the interest rate is 4%. People get the investment back when they retire. For the unfunded part, 50% of the payroll tax collected from young workers are paid to retirees immediately. In each period, the number of people grows by 5%, and the wage grows by 5%. In period 1 there are 100 young workers (first generation). In period 2, the first generation can get benefits from the social security program. Question: compute the benefit that a retiree of the first generation can get in period 2.Your employer contributes $50 a week to your retirement plan. Assume that you work for your employer for another 20 years and that the applicable discount rate is 9 percent. Given these assumptions, what is this employee benefit worth to you today?
- Your retired client has accumulated investment and retirement assets. He is happy with an after - tax lifestyle of $ 165,000 a year at the end of the year for 18 years. Leaving aside issues of inflation, his assets can will earn after-tax interest rate of 10.90 percent per year compounded annually. How much has your client accumulated? Round the answer to two decimal places. Your Answer:Ruth has asked for help in determining whether she should receive her $32,500 bonus check in the current year or next year. In the current year, her marginal tax rate is 24% and she anticipates she will be in the 32% marginal tax bracket next year. What advice can you give Ruth? Net revenue from bonus $ Current year Ruth should choose to receive her bonus in the ✓year. Next yearGail Trevino expects to receive a $590,000 cash benefit when she retires eight years from today. Ms. Trevino’s employer has offered an early retirement incentive by agreeing to pay her $363,000 today if she agrees to retire immediately. Ms. Trevino desires to earn a rate of return of 8 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the present value of the $590,000 future cash benefit. Assuming that the retirement benefit is the only consideration in making the retirement decision, should Ms. Trevino accept her employer’s offer? (Round your final answer to the nearest whole dollar value.) present value ?
- Russell and Charmin have current living expenses of $66,260 a year. Estimate the present value amount of income they will need to maintain their level of living in retirement. Assume an average tax rate of 11 percent and a(n) 74 percent income replacement ratio. The estimated present value amount of income they will need to maintain their level of living in retirement is?Your employer contributes $75 a week to your retirement plan. Assume that you work for your employer for another 20 yrears and that the applicable discount rate is 7.5 percent. Given these assumptions, what is this employee benefit worth to you today?Gail Trevino expects to receive a $580,000 cash benefit when she retires seven years from today. Ms. Trevino’s employer has offered an early retirement incentive by agreeing to pay her $354,000 today if she agrees to retire immediately. Ms. Trevino desires to earn a rate of return of 8 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the present value of the $580,000 future cash benefit. Assuming that the retirement benefit is the only consideration in making the retirement decision, should Ms. Trevino accept her employer’s offer? (Round your final answer to the nearest whole dollar value.)
